FERC Denies Petition for Declaratory Order on Jurisdiction for Lake Powell Pipeline

On September 20, 2018, FERC denied the Utah Board of Water Resources (“Utah Board”) and the Washington County Water Conservancy District’s petition for a declaratory order, asking FERC to find that its licensing jurisdiction under the Federal Power Act (“FPA”) extends to all of the Lake Powell Pipeline Project facilities identified in the Board’s license application for the project, including 89 miles of water delivery pipeline.

On May 2, 2016, the Utah Board filed an application with FERC for its proposed Lake Powell Project, which would transport up to 100,000 acre-feet of water annually from Lake Powell in northwestern Arizona through a buried 69-inch-diameter pipeline to southern Utah, where the water would be pumped approximately 50 miles to a high point within the Grand Staircase-Escalante National Monument, from which it would flow downhill 89 miles, passing through four in-line hydroelectric turbines, a 35-megawatt (“MW”) peaking project at Hurricane Cliffs, a planned 300-MW pumped-storage project, and a 5-MW generating facility at Sand Hollow reservoir. This “Hydro System,” as described in the license application, would include all of the generating facilities, as well as the entire 89 miles of water delivery pipeline that would transport water through it. On December 11, 2017, FERC issued a notice that the project was ready for environmental analysis, which stated that “[t]he Commission has not yet determined whether these water delivery pipelines will be included as part of the licensed hydro facilities.”

In response to FERC’s statement in its notice, Utah Board and the Washington County Water Conservancy District (collectively, “Petitioners”), the project’s intended beneficiary, filed a petition for declaratory order on December 27, 2017, asking FERC to find that its licensing jurisdiction under the FPA includes the 89 miles of water delivery pipeline. Several environmental advocacy groups intervened in the proceeding opposing the petition (“Opponents”).

Petitioners argued that, in various documents issued prior to the Utah Board’s license application, including a 2008 scoping document and 2009 study plan determination, FERC staff recognized the downhill portions of the pipeline as jurisdictional facilities, and that the pipeline segments are “large diameter penstocks” that are necessary and appropriate for hydroelectric generation. Therefore, petitioners claimed that these portions of the pipeline are “project works” that are part of a complete unit of development, as those terms are used in the FPA. The Opponents argued that FERC should deny the petition, maintaining that the Utah Board has not sufficiently demonstrated that the 89 miles of pipeline are jurisdictional, and that the Project’s hydroelectric generation is secondary to its main purpose of water delivery, and that “[t]he mere fact that various facilities are proposed for licensing by an applicant is not sufficient reason to assume that all of such facilities are properly the subject of a license.”

In considering the petition, FERC examined whether the pipeline segments connecting the generating facilities are “project works” that are part of a complete unit of development. Under the FPA, the term “project works” is defined as “the physical structures of a project,” and “project” is defined by the FPA to include “water conduits.” In interpreting these requirements, FERC looked to two groups of its prior orders: those requiring that all parts of a complete unit of development must be licensed, and those finding that FERC’s jurisdiction does not extend to water conveyance systems not directly related to hydroelectric power generation. In considering these orders, FERC found that where all parts of a project are located relatively close to each other and operate together to produce power, FERC has generally licensed them as a complete project. However, in cases of large water delivery projects like the Lake Powell Pipeline, that transport water many miles from its source, FERC has found that the water delivery structures themselves are not necessary for operation and maintenance of the hydroelectric generating facilities and need not be included as part of the licensed project.

FERC also looked to amendments to the FPA authorizing FERC to grant exemptions from licensing under the FPA for hydroelectric generating facilities that use the hydroelectric potential of a conduit for agricultural, municipal, or industrial consumption, finding that Congress’s creation and expansion of this authority validates FERC’s interpretation that only the generating facilities, and not the conduit itself, should be included as part of the licensed project. FERC concluded that it is neither required nor appropriate for FERC to exert jurisdiction over the 89-mile water conveyance pipeline, and that doing so could lead to attempts to construct large amounts of pipeline unrelated to power production in order to take advantage of the eminent domain authority and federal preemption of inconsistent state requirements that a FERC license provides.

FERC’s order concluded that unless the Utah Board requests otherwise, FERC will consider whether, and on what conditions to authorize the hydroelectric developments proposed to be located within the pipeline, and stated that the Utah Board may amend its license application to seek one or more separate licenses for those developments, or request conduit exemptions or qualifying conduit status for any developments that meet the statutory requirements for those facilities.

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